One of the most profitable products for Tanner Pharmaceuticals Inc. (Tanner), a major U.S. pharmaceutical company, was a vaccine with the brand name Zorstat. Tanner was facing increased public scrutiny over the price of Zorstat. The company was being accused of “being greedy and raising prices in ways that victimized vulnerable people.” In two days Jack Stevens, the lead independent board member for Tanner, would attend the annual meeting of independent directors. The Zorstat pricing controversy was on the agenda. Stevens would have to take and defend a position on Tanner’s drug pricing strategy. Inevitably, there would be a heated discussion on Zorstat and whether management was effectively driving shareholder value with drug pricing decisions.

Teaching:

This is a short disguised case that explores a complex issue - pharmaceutical drug prices. The case can be used early in a competitive strategy class to illustrate several key concepts: competitive forces and industry attractiveness, mission statements and their link with strategy, and company stakeholders. The pharma industry provides a good way to introduce industry analysis and the five forces model. The industry is very attractive and the moderate to weak competitive forces provide students with an appreciation of the theoretical soundness of the model. The question of profit-driven healthcare and its contribution to global medical innovations is a provocative subject for discussion. This discussion can be used to examine the broad question of corporate social responsibility (CSR).